RANGOON — As the Dec. 23 deadline approaches for the government’s new car import policy, individual importers are a major factor in pushing up the black market dollar exchange rate, industrial observers say.
According to the new import policy, which the NLD government introduced in November, individual car importers will only be allowed to bring in cars from model year 2011 to 2014. In the truck and bus category, only vehicles from model year 2007 to 2014 will be allowed for import in 2017.
The Ministry of Commerce set the implementation for the new policy on Dec. 23, so for the next two weeks, car importers are still governed by the old policy, which allowed cars from model years 2006 to 2009.
Since older model cars tend to sell for lower prices, importers have been rushing to obtain import licenses while the old policy remains in place. This rush to buy cars have increased the market demand for US dollars and pushed the black market exchange rate steadily higher.
“Importers have to beat the deadline. That’s why the demand for dollars is rising, and the exchange rate is going up too,” said Dr. Soe Tun, chairman of the Myanmar Automobile Dealers Association.
As of Dec. 8, the exchange rate reached 1,374 kyats per dollar on the black market. Some private banks were trading at 1,326 kyats, and the Central Bank rate stood at 1,310 kyats. On Wednesday, the black market rate reached 1,376 kyats, the highest recorded since the new government came to power in April.
“The rate was only around 1,150 kyats when the new government started in April. Now this week’s rate is the highest ever,” said a currency exchange dealer in Rangoon’s Pabedan Township.
Under the quasi-civilian government that controlled Burma from 2011 to March 2016, the highest exchange rate recorded was 1,300 kyats per dollar. The highest rate ever recorded was 1,400 kyats, which happened in 2007 during the Saffron Revolution.
“Recently, while the amount of import goods has been increasing, demand for dollars has been high. Now the new car import policy is going to push the dollar demand even higher,” Dr. Soe Tun said.
“The exchange rate will increase until Dec. 23,” he said.
Under the new import policy, importers who purchase a car with a free permit will only be allowed to buy left-hand-drive cars from model years 2015 to 2017. Although these rules are not a major problem for new car showrooms, local auto sellers and individual car dealers will definitely not like the policy, according to the car dealer industry.
“I closed my showroom last month. The car market has just been changing so much,” Dr. Soe Tun said.
U Myat Thin Aung, who opened a brand new Chevrolet showroom in Rangoon, said the car import policy’s deadline would keep pushing up the currency exchange rate, but he doesn’t expect that to last until the end of December.
“December is peak season, so more dollars will come into the country through other businesses. There will be more balance between demand and supply. Then we’ll see the rate increase again during the summer season,” said U Myat Thin Aung.
The vehicle import policy in Burma is a complicated one. Importers must obtain a slip for each new vehicle they bring into the country, and this slip can only be obtained by trading in a used vehicle. The rule is aimed at keeping the number of car imports low because Rangoon’s streets are already so crowded.
Owners of domestically produced cars can trade in their vehicle when they are 10 years old. Foreign cars must be at least 20 years old to qualify.
Since 2011, the national car import policy has changed at least 10 times, causing ongoing challenges for many car showrooms, individual importers, and other related businesses.